Domestic policy choices that favor corporations, the wealthy, and politically connected sectors of the U.S. economy have been the main cause of stagnating middle class incomes in the United States, says a policy brief from the Carnegie Endowment.

In U.S. Living Standards in an Era of Globalization, Carnegie Endowment Senior Associate Sandra Polaski argues that globalization revealed and exacerbated--rather than created--the unequal distribution of U.S. economic gains over the last three decades. Polaski further contends that reform of domestic labor laws, the tax system, and international economic policy are the policy tools needed to reverse stagnating incomes and the erosion of job security, health care, and pension plans. These policy changes would also sustain domestic demand in the U.S. economy.